A decrease in supply will cause the largest increase in price when
A) both supply and demand are inelastic.
B) both supply and demand are elastic.
C) demand is elastic and supply is inelastic.
D) demand is inelastic and supply is elastid.

Question

Quizplus · Accepted Answer

When both supply and demand are inelastic, a decrease in supply leads to a significant increase in price because consumers and producers do not easily change their quantity demanded or supplied in response to price changes.

A Decrease in Supply Will Cause the Largest Increase in Price